ARTICLES

 

Move to ERP

Why a stand alone financial system is not enough for growing businesses.

When  businesses start an extensive IT  strategy and budget to support business processes is probably not on the agenda. Many small organisations start with  some PC’’s with word processing and spreadsheet capability combined with an off the peg accounting package usually used by a bookkeeper initially, and then an in house accounts person as the business grows, in order to record the financial position and the  meet the requirements of the ATO. Often the package chosen will be to satisfy the preferences of your accountant not necessarily your business needs.

As the business grows and it is clear parts of the business will benefit from IT support  new   software packages to address that need will be acquired for example CRM, stock management or planning. Before long you have a business running a number of systems, often unable to communicate with each other .Whilst performing a task they often also create duplication in record keeping and can provide headaches when they don’t function in the way you were lead to  believe. Most IT support for these products is patchy and when you have  a number of software items from a number of suppliers blame is always laid on someone else's product not functioning properly.

ERP systems have been used by large organisations since the 1990’s but it is software for smaller enterprises  is becoming more widespread and some of the larger providers as well as independent companies are supplying software to the smaller business user. Whilst there is no doubt that on a price basis they will appear more expensive than existing software the cost benefit of installing an ERP system can be significant.

An ERP system will offer integrated records in some or all of  the  following areas

 

• Financial Management
• Manufacturing Planning
• Purchasing and Supply  Management
• Human Resource and Payroll
• Project Management
• Client Relationship Management

Benefits

ERP can deliver greater productivity and cost benefits through improved business processes and workflows

1. All company data  is available in real time   in one centralized repository flagging
   - Cashflow issues
   - Stock outs
   - Scheduling bottlenecks
2. Improved overhead allocation and recovery through ability to track jobs and assign resources to work.
3. Avoids duplication and double entering data saving time and input error.
4. Improved traceability throughout the system through less complex audit trail.
5. Reduced dependence on individuals when data is held on separate systems with limited knowledge throughout the organisation causing major problems due to annual leave, illness or staff turnover.
6. All Data in one place reducing risk to provided an IT protocol is in place.
7. Better lead time information and therefore increased customer satisfaction.
    

Choice and implementation of an ERP system is not without difficulties and dependent on the state of raw data, resources can take a small business from 3 months to a year to implement depending on current processes and data. Costs will certainly appear higher on a pure price comparison and the costs can be difficult to quantify on a dollar basis. Return on Investment can be difficult to quantify as an ERP system will be perform functions that current systems and processes are unable to do. There will be administration savings from less duplication, additionally there will be production savings from reduced lost production time due to no stock outs, better planning as a result of improved forecasting. Unless existing KPI’s are in place real comparisons are difficult but savings of at least 5% should be achievable.

Training of all staff is imperative, if your business is going to run from one system all users must be fully trained and all new employees must be trained as part of their induction process.